Greg Mankiw mocks the muddled thinking of health-reform advocates.
I have a plan to reduce the budget deficit. The essence of the plan is the federal government writing me a check for $1 billion. The plan will be financed by $3 billion of tax increases. According to my back-of-the envelope calculations, giving me that $1 billion will reduce the budget deficit by $2 billion.
Now, you may be tempted to say that giving me that $1 billion will not really reduce the budget deficit. Rather, you might say, it is the tax increases, which have nothing to do with my handout, that are reducing the budget deficit. But if you are tempted by that kind of sloppy thinking, you have not been following the debate over healthcare reform.
His point seems to be that if the health care law can be called fiscal reform, as advocates claim, then this ridiculous handout plan can also be called fiscal reform--which would be absurd, or so he asks us to believe.
This is not up to Mankiw's usual standards.
First, it is not wrong to ask about the fiscal consequences of a package of policy changes. This is standard operating procedure in costing legislation, and I see no reason to object. In the case of health care, the tax increases and subsidies are in the same law. Even in Mankiw's satirical example, the tax increases and the handout are of a piece: it is simply incorrect to say that they have nothing to do with each other.